Nuclear expansion right call for S.A.

Editorial: City's prosperity rests on a sensible stake in the South Texas Project addition.

Express-News editorial :
October 3, 2009

The South Texas Project nuclear power plant in Bay City is looking to expand with two more reactors.

San Antonio's phenomenal growth in recent decades is due in no small part to the reliable, affordable energy generated by its municipally owned utility, CPS Energy.

CPS customers pay rates that are routinely among the lowest of any major utility in the country. That's a key element in the Alamo City's affordability, lowering the cost of living for individuals and the cost of production for businesses.

Keeping those rates low and steady is essential for the city's continued economic prosperity. For the foreseeable future, the best way to do so is for CPS to invest in a sensible expansion of nuclear generation at the South Texas Project in Bay City while aggressively pursuing efficiency and sustainability and positioning itself to take advantage of advances in green energy technology.

CPS has wisely developed a balanced portfolio of energy sources, including coal, gas and renewables. That has helped shield ratepayers from turmoil in the energy markets.

The greatest share of the utility's baseload, however, is generated by STP units 1 and 2, which came online two decades ago. Even with the recent plunge in natural gas prices, nuclear-generated power costs about one-third as much as gas-generated power. It costs about half as much as coal-generated power.

The South Texas Project, of which CPS is a 40 percent owner, was originally designed for four units. Expansion of the facility with a technologically proven design and federal backing in the form of loan guarantees makes good economic sense - at the right price.

The current estimate to build the two new reactors is $13 billion. Because the project's construction partner, Toshiba Corp., has already built four reactors of the same design, the cost estimates and construction timelines for units 3 and 4 are far less nebulous than when overruns and delays plagued development of units 1 and 2.

Nevertheless, there is still a high degree of risk associated with a venture of this magnitude, especially over the next 2-3 years as CPS and its partners navigate the engineering and licensing processes. Minimizing that risk makes good sense for CPS and its ratepayers.

Mayor Julián Castro has proposed reducing CPS' ownership in the expansion from a planned 40 percent down to the 20-25 percent range. Along with other CPS generation and efficiency projects, that share would still provide the electricity that a growing San Antonio needs. But it will also significantly reduce the utility's exposure to risk while freeing up billions of dollars over the next decade to invest in sustainability and emerging clean technologies.

Castro's proposal deserves the support of the CPS board of directors and the San Antonio City Council, which must move swiftly to authorize the utility's sale of an additional $400 million in bonds to finance the project.

During the public hearing process facilitated by CPS and Castro, opponents of the nuclear expansion raised many valid concerns about costs, safety and water as well as how such a large investment in nuclear power will affect CPS' commitment to sustainability. However, the utility adequately addressed those concerns. The positive aspects of this project, in this regulatory environment, far outweigh the negatives.

Nuclear power remains the best method of large-scale, low-cost power generation to minimize dependence on fossil fuels. STP units 3 and 4 will bridge the city's power demands until technology solves problems of cost and storage for renewable sources.

Supporters of a 40 percent share in units 3 and 4 argue that a reduced stake means CPS will be losing the opportunity to sell excess capacity on the wholesale market and reduce rates for retail customers. That's a risk a municipally owned utility should be willing to take.

A carefully managed expansion of the South Texas Project, with intense oversight by the City Council, is in the best interests of the utility, the city, ratepayers and the environment. San Antonio is reaping the benefits of nuclear power today. A stake in units 3 and 4 will continue those benefits in coming decades.